Johnny West: How extractives contracts interact with governance
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Extractives contracts exist within a complex web of interacting legal frameworks and involve ongoing negotiation between parties. Key points are: 1) Contracts operate within both domestic laws and international agreements and conventions. 2) Contracts establish an ongoing framework for negotiation over issues like future discoveries, accounting procedures, and terms that are intentionally vague. 3) Contracts do not provide predictable financial outcomes or disclose technical data like resource quantities or extraction techniques. 4) Understanding all aspects of a contract can be challenging as terms are spread across multiple articles and sections.
Johnny West: How extractives contracts interact with governance
- 1. How extractives contracts interact with governance Presentation to the EITI Board Abidjan, October 16th, 2013 Johnny West, OpenOil
- 2. Four rules of thumb about extractives contracts 1)Contracts live in a complex natural habitat 2)Negotiation is permanent 3)There is a lot NOT in the contracts 4)Contracts are a tangled web
- 3. 1) Contracts in their natural habitat National legal framework Regulations Extractives sector laws Constitution General laws (eg labour, environment, human rights) International legal framework Conventions Investment Treaties
- 4. Which can be very different...
- 5. 2) The contract as framework for permanent negotiation Let's talk about that later Future gas finds Future oil finds Accounting Procedures Placeholder language “generally accepted international practices” “prudent” “diligent” “use reasonable efforts”
- 6. “as soon as reasonable”
- 7. Renegotiation within the contract
- 8. 3) What extractives agreements don't include... Predictable financial results Fiscal regimes are formulae, not hard numbers Future: price is unknown Past & Present: capital and operating costs unknown Technical and Geological Data How much resource What techniques are used to get it.
- 9. Formula, not numbers (Ghana)
- 12. 4) The contract as complex web Paperchase: how long does an agreement last? (Iraq) Article 3: Term of Contract Article 1: Definitions Article 39: Signature, Ratification and Effective Date But btw, please read the whole contract...
- 15. Four rules of thumb about extractives contracts 1)Contracts live in a complex natural habitat 2)Negotiation is permanent 3)There is a lot NOT in the contracts 4)Contracts are a tangled web
- 16. The challenge of contracts in the governance space Four countries: finance minister not seen the contracts A missed phone call scotches a bid round Joined-up government would include ministries of finance, economy, environment, justice, labour, auditorgeneral, local. Negotiation and monitoring stages. Government brief is inherently more complex
- 17. But the picture is changing... slowly... Government learning curve is accelerating Contracts are becoming more standardised Flexible (sliding scale) terms becoming more common
- 18. Ecuador: civil society voice
- 21. Global compare and contrast...
- 23. Public interest financial modelling. This...
- 24. ...could turn into this...
- 25. ...and this...
- 26. Patterns start to emerge...
- 27. thank you for listening johnny.west@openoil.net